It took the Supreme Court less than a minute on Friday to stay a National Company Law Appellate Tribunal (NCLAT) order, which had last month reinstated Cyrus Mistry as executive chairman of Tata Sons. While the tribunal verdict had surprised the corporate world, Mistry, who was removed as Tata Sons chairman in a boardroom coup in October 2016, maintained he was fighting for the rights of minority shareholders and was not interested in returning to the post he held more than three years ago.
Around noon, when the three-judge Bench comprising Chief Justice S A Bobde and Justices B R Gavai and Surya Kant took up the Tatas’ appeal against the NCLAT verdict on Friday, it said the tribunal order suffered from “basic errors”. The Bench noted that never before had there been a judgment of this nature under the Companies Act. With this stay, the salt-to-software conglomerate can get back to business as usual with N Chandrasekaran at the helm of Tata Sons. The Mistry camp has four weeks to respond to the court notice, though senior advocate C A Sundaram, appearing for Cyrus Investment had sought two weeks to file a reply.
The court has ordered the $110-billion Tata group not to exercise power under Article 75 of the Company Law to push out shares of minority holders in the company. Tata Trusts, with a 66 per cent stake, is the largest shareholder in Tata Sons, while Shapoorji Pallonji holds 18 per cent in the Tata group’s holding firm.
The top court has stayed the NCLAT’s order for conversion of Tata Sons from private to a public entity.
“Our first impression is not good about the order of the tribunal. The tribunal granted the prayer which was not prayed…There was no prayer in the petition for reinstatement of Mistry but the tribunal went ahead with it and ordered his reinstatement,” the Bench said soon after the matter, 28th on the list, came up in the court. Tatas are being represented by a battery of prominent lawyers including Abhishek Manu Singhvi, Harish Salve and Mohan Parasaran. The lawyers for the Mistry family include Aryama Sundaram, Arun Kathpalia and KG Raghavan.
The Bench observed, “You (Cyrus) have been out of the saddle quite a long time...How does it hurt you today?”
The SC has issued notices to Cyrus Investment, Mistry, and others, while posting the matter after four weeks.
“We have to hear the matter in detail,” the three-judge Bench said. The NCLAT had last month asked Tata Sons to reverse the status of the company from private to public limited and reinstate Cyrus Mistry as a director on its board and on three other group firms. NCLAT, in its order, had called the conversion of Tata Sons from public to private ‘’illegal’’ and Mistry’s removal ‘’oppressive’’ to minority shareholders.
Tata Sons in its plea to the SC had said, “The direction to restore Cyrus Mistry for his remaining term, without noticing that the term has come to an end is a recipe for disaster, for the reason that it will create unnecessary confusion in the working of companies and lead to more conflict.”
After the Tatas challenged the NCLAT order in the SC, Mistry said in a public statement that he would not pursue the executive chairmanship of Tata Sons, or directorship of TCS, Tata Teleservices or Tata Industries—the three firms listed by the tribunal.
“I will however vigorously pursue all options to protect our rights as a minority shareholder, including that of resuming the 30-year history of a seat at the Board of Tata Sons and the incorporation of the highest standards of corporate governance and transparency at Tata Sons,” he added.